Barclays boss John McFarlane looks to cut costs despite profit rise in bid to streamline bank

Suzie Neuwirth
New broom at Barclays John McFarlane (Source: Getty)
Barclays, Britain’s largest bank after HSBC, yesterday delivered £3.1bn of pre-tax profits for the first half of this year, boosted by a 36 per cent rise in the performance of its investment banking arm, which chipped in almost half the total. The investment bank made £1.44bn pre-tax profit.

John McFarlane, who joined the bank as chairman in April, sacked chief executive Antony Jenkins three weeks ago and then took over as executive chairman, heralded the investment bank’s performance, and said: “The challenge for the team is to convert this performance into sustainable economic returns through subsequent periods.

“Barclays today has a good portfolio of businesses. However, we need to accelerate the execution of the strategy… [it] remains far too hierarchical, bureaucratic and group-centric, I therefore want to see much more streamlined processes.”

He is accelerating his plan to sell non-core assets to £20bn by the end of 2017, having already shrunk them to £57bn from £75bn in December last year, with retail businesses in Italy and Portugal among those to be put on the block.

The bank is maintaining its 6.5p per share dividend this year.

McFarlane said he intends to cut costs as a percentage of income to “mid 50s” per cent, from 70 per cent in the first half of the year, which is widely expected to involve further redundancies and more branch closures.

Barclays has closed 98 branches in Britain over the past year and is half-way through a plan launched by Jenkins to cut 19,000 jobs by the end of next year, including 7,000 in the investment banking division.

But speculation is rife that McFarlane plans to slash more than 30,000 of its staff within two years, which would bring the global bank’s workforce below 100,000 by the end of 2017, from a current total of around 130,000.

While the FTSE 100 bank posted a 25 per cent rise in statutory pre-tax profit to £3.1bn for the first half, this was partly due to higher exceptional charges, such as PPI compensation, in the comparable period last year. On an adjusted basis pre-tax profit rose 11 per cent to £3.7bn.

Ian Gordon, analyst at Investec, told City A.M.: “Today’s news brings an element of positive relief, rather than euphoria, as the full-year returns will be weaker due to bank levies.

“McFarlane has indicated that there will be a more ruthless focus on core competencies, as out of the many markets Barclays operates in, only the UK, US and South Africa really contribute to profits,” he said.
Barclays’ shares closed up 5p at 284.95p.

Related articles